Today’s consumers are more value conscious, price driven, and much, much more demanding than in days gone by. Most companies have realised that it is more efficient and profitable to keep old customers than it is to gain new ones. This has led to what is known as Customer Relationship Marketing or CRM.
This is not a new strategy. Before supermarket chains drove small businesses out of the market, the owners of the local corner shops probably knew all of their customers. They knew you, they knew what you liked, and they could recommend products based on this.
Then came mass production and with it, the demise of the direct relationship between customer and producer. Products began appearing on shelves that the consumers neither knew or trusted. Marketers realised they had to change something in the way products were sold, and so brands were born. Here was a means of providing the consumers with reassurance of consistent quality. But as the market again became saturated, with hundreds of new product introductions every year, brands were no longer enough to differentiate products.
Thus CRM came back into fashion, as marketers began to realise several facts. A few of these are listed below:
- When you lose a customer, you lose his lifetime value.
- A 5% increase in customer loyalty will result in profit increase of more than 25%.
- In nearly every industry, 20% of customers account for 80% of the profit.
- Seven out of ten customers switch to competition due to poor services.
- It takes up to twelve good experiences to overcome one bad experience of a customer.
With the rise of computers and the internet, consumers are much better informed and less susceptible to easy maniplulations. This had made marketers realise that a shift in emphasis is needed from transaction based marketing – i.e. a one time deal, to relationship marketing where long term mutually satisfiying relationships are created with consumers in order to earn and retain their long-term business.
In other words, instead of trying to maximise profit from each and every transaction, relationship marketing focuses on maximising profits over the lifetime value of the customer by creating and sustaining relationships. Thus it cuts down on transaction costs and time.
Most companies who use CRM as a marketing strategy implement it with CRM software. This software can be very expensive, not just the cost of the software but also the training needed to familiarise employees with it. However this money spent usually does not result in better profits. The reason for this is a fundamental one that most companies overlook. They assume that technology alone will cure their customer retention problems and they lack clear objectives for their CRM implementation.
The solution is not always a simple one. You must understand that using CRM effectively does not just mean restructuring your sales and marketing departments. Instead you must view CRM as an integrated business strategy that places consumers directly at the center of the consciousness of your organisation. For small businesses a large, expensive complicated CRM software is usually not the answer.
Instead you should focus on creating relationships with your customer base and fostering loyalty. You should also encourage collaboration with consumers, asking them to give feedback on your product or changes they would appreciate. This makes the customer feel like they have contributed to the product and makes them more likely to buy it.
A software I would recommend for managing your customers is Tree.io ( http://www.tree.io ) With this inexpensive software not only can you control all aspects of your CRM strategy, you can manage all the other aspects of your business as well. As a bonus it’s intuitive interface means it requires barely any training to be used effectively.
I hope you enjoyed this article and feel free to add comments or suggestions below.